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Flashcards: Federal Taxation of Entities

If the Alpha Corporation's 2015 alternative minimum taxable income was $\$210,000$ . Which of the following properly identifies the exempt portion of the Alpha Corporation's 2015 alternative minimum taxable income?

$\$25,000$

$\$25,500$

$\$24,500$

$\$24,000$

$\$26,000$

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Flashcards: Federal Taxation of Entities

Your answer:

$\$25,500$

Your answer:

$\$24,500$

Your answer:

$\$24,000$

Your answer:

$\$26,000$

Correct answer:

$\$25,000$

Explanation:

This problem asks us to determine the exempt portion of the Alpha Corporation's alternative minimum taxable income (AMTI). A corporation is allowed an exemption of up to $\$40,000$ in computing it AMTI; however, this exemption is reduced by twenty-five percent of the corporation's AMTI in excess of $\$150,000$ . We can write this by using the following equation:

$\textup{Exemption}=\$40,000-[(\textup{Income in excess of \$150,000-\$150,000})\times 25\%]$

Substitute and solve.

$\textup{Exemption}=\$40,000-[(\$210,000-\$150,000})\times 25\%]$

$\textup{Exemption}=\$40,000-(\$60,000\times 25\%)$

$\textup{Exemption}=\$40,000-\$15,000$

$\textup{Exemption}=\$25,000$

Flashcards: Federal Taxation of Entities

For the current year, The Echo Company possessed the following income:

$\textup{Profit from operations}=\$110,000$

$\textup{Dividends from 20\%-owned taxable domestic operation}=\$1,100$

In the Echo Company's current year taxable income, how much should be included for dividends received?

$\$220$

$\$240$

Cannot be determined

$\$350$

$\$330$

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Flashcards: Federal Taxation of Entities

For the current year, The Echo Company possessed the following income:

$\textup{Profit from operations}=\$110,000$

$\textup{Dividends from 20\%-owned taxable domestic operation}=\$1,100$

In the Echo Company's current year taxable income, how much should be included for dividends received?

Your answer:

$\$240$

Your answer:

Cannot be determined

Your answer:

$\$350$

Your answer:

$\$330$

Correct answer:

$\$220$

Explanation:

This problem is asking us to determine the amount of dividends to be included in the Echo Company's taxable income for the current year. The dividends were received from 20%-owned taxable domestic corporations; therefore, they are eligible for an 80% dividends received deduction. We can compute this value using the following formula:

$\textup{Dividends}=\$1,100-(80\%\times \$1,100)$

$\textup{Dividends}=\$1,100-\$880$

$\textup{Dividends}=\$220$

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Flashcards: Federal Taxation of Entities

Flashcards: Federal Taxation of Entities

Flashcards: Federal Taxation of Entities

Flashcards: Federal Taxation of Entities

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Flashcards: Federal Taxation of Entities

Flashcards: Federal Taxation of Entities

Flashcards: Federal Taxation of Entities

Flashcards: Federal Taxation of Entities

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DMCA Complaint

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Complaint Details

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